Prokaryotic DNA replication is compartmentalized at the cellular membrane. The Bacillus subtilis phage varphi29-encoded membrane protein p16.7 is one of the few proteins known to be involved in the organization of prokaryotic membrane-associated DNA replication. The functional DNA binding domain of p16.7 is constituted by its C-terminal half, p16.7C, which forms high affinity dimers in solution and which can form higher order oligomers. Recently, the solution and crystal structures of p16.7C and the crystal structure of the p16.7C-DNA complex have been solved. Here, we have studied the p16.7C dimerization process and the structural and functional roles of p16.7 residues Trp-116 and Asn-120 and its last nine C-terminal amino acids, which form an extended tail. The results obtained show that transition of folded dimers into unfolded monomers occurs without stable intermediates and that both Trp-116 and the C-terminal tail are important for dimerization and functionality of p16.7C. Residue Trp-116 is involved in formation of a novel aromatic cage dimerization motif, which we call "Pro cage." Finally, whereas residue Asn-120 plays a minor role in p16.7C dimerization, we show that it is critical for both oligomerization and DNA binding, providing further evidence that DNA binding and oligomerization of p16.7C are coupled processes.